BMO Bank of Montreal has launched a new chequing account that significantly boosts the number of Air Miles reward miles that can be earned on household spending and everyday banking.  The new BMO Air Miles bank plan allows customers to earn one Air Miles reward mile for every $30 they spend on their debit card.

BMO’s New Air Miles Bank Plan

Debit card use continues to be the most popular method of payment for Canadians, according to industry figures. BMO hopes to capitalize on this growing trend, and is one of the only major banks to offer customers the ability to earn loyalty rewards on an everyday banking account.

Last year, Scotiabank introduced the Scotia Moneyback account, where customers can earn 1% cash back on all debit card spending.  CIBC’s unlimited chequing account gives customers the chance to earn Aeroplan miles every month.  More recently, RBC partnered with Shoppers Drug Mart and launched a bank account where customers can earn Shoppers Optimum points.

Related: New RBC Shoppers Optimum Bank Account

BMO spokesman, David Heatherly says Canadians continue to place high value on the ability to make everyday transactions using a debit card.  With the introduction of the BMO Air Miles bank plan, customers can now significantly enhance the value they are getting from this payment method by accelerating the rate of earning reward miles and ultimately spending smarter.

Additionally, with the new BMO Air Miles bank plan, BMO customers can further accelerate their Air Miles reward miles earning potential:

• Up to 600 bonus Air Miles reward miles each year when they maintain a minimum monthly balance of $3,000
• 300 bonus Air Miles reward miles each year when they also carry a BMO Gold Air Miles MasterCard

How Many Air Miles Can You Earn?

So if you spend $1,800 a month on your debit card, carry the BMO Gold Air Miles MasterCard, and maintain the minimum monthly balance of $3,000, you’ll earn up to 1,620 Air Miles a year.

When you redeem Air Miles for gift cards, or use their new Air Miles cash feature, each reward mile is worth 10.5 cents.  That means you can earn up to $170.10 by using the new BMO Air Miles bank account to its full capacity.  If you prefer to redeem Air Miles for flights, your rewards can go even further.

Customers can also use the BMO Air Miles calculator to find out how much their everyday spending, whether they use their BMO debit or credit card, can add up to hundreds of ways to reward themselves.

Canadians Looking For More Value From Rewards Programs

According to a BMO survey, at least 70% of Canadians report that they belong to at least one loyalty rewards program, and 42% plan to redeem their points within the next five years, with one in 10 saying that they will redeem their points during the summer months.

Related: Redeem Air Miles For Gift Cards

Mr. Heatherly noted that in the current economic environment, Canadian households are looking for value more than ever.

He said that Canadians have been spending more cautiously in light of the economic climate, and are looking for ways to squeeze more out of every dollar they spend.  The new BMO Air Miles bank plan is part of a suite of BMO products designed to provide added value for their customers, regardless of which payment method they choose.

Andy Wright, President of the Air Miles Reward Program, says initiatives that leverage Canadians’ growing interest in rewards, such as BMO’s new Air Miles bank plan, speak to the sensibilities of today’s consumers who are looking for ways to bolster their spending power.

Mr. Wright said that Air Miles is thrilled to enhance their ongoing partnership with BMO and empower Canadians to stretch their dollar even further by receiving even more value by earning Air Miles reward miles on the everyday purchases they make.

Final Thoughts

The BMO Air Miles bank plan is basically an unlimited chequing account where you earn rewards to help off-set the monthly account fee.  At $13.95 a month, you’ll need to take full advantage of the bonus Air Miles features to earn enough rewards to cancel out the fees.  Just like the Scotia Moneyback account, the best you’ll do with BMO’s Air Miles bank plan is break even.

This account is right for you if you’re a heavy debit user and like to earn Air Miles with your everyday purchases.  Combined with the BMO Air Miles Gold MasterCard, you can significantly boost your Air Miles earnings.  However, if you want to get the most from your rewards cards, a better idea is to switch to a no fee bank account and use a travel rewards credit card for all of your spending and recurring bill payments.

One of the best things about the MBNA Smart Cash MasterCard is getting 2% cash back on your grocery and gas purchases – up to $400 a month.  We spend between $700 and $1,000 a month on groceries and gas, so we should be able to easily max out this rewards multiplier.

The problem is that we do a lot of our grocery shopping at Costco – up to $400 a month – and they only accept American Express credit cards.  I was using an American Express Air Miles credit card at Costco, which gets me 1 Air Mile for every $15 spent.  The rate of return for Air Miles rewards is only 0.73%, compared to getting 2% back with the Smart Cash card.

I looked into the TrueEarnings Card from Costco and American Express, but I’d only earn 0.25% on the first $1,000 in spending, 0.50% on the next $2,000, and then 1% on any amount over $3,000.

My Semi-Failed Attempt To Use A Non-Amex Rewards Card At Costco

When I looked at my rewards statement from MBNA, I noticed that I was getting credited 2% for purchases at Wal-Mart and Superstore, even though we didn’t actually buy groceries.  It seems like certain retailers are classified as grocery stores, no matter what you purchase from them.

This gave me an idea for a work-around to my Costco problem.  I could try and get 2% cash back by purchasing Costco cash cards online with my Smart Cash card.  So, last week I bought $400 worth of Costco cash cards from their website using my Smart Cash card.  That worked, no problem.

Then I checked my rewards statement to see how MBNA would code this purchase.  A couple of days later, I see the transaction appear in the rewards statement:

This is a good screen shot to show you how MBNA classifies grocery spending.  Unfortunately the Costco cash cards were not coded as a grocery purchase, so I only received 1% cash back.  Shoppers Drug Mart (SDM) also does not qualify as grocery spending, but Wal-Mart does qualify*.

*You’ll notice the rewards for my Wal-Mart purchase is at 5%, not 2%.  This is because I’ve been upgraded to the MBNA Smart Cash World MasterCard and get another 6 month period with 5% cash back on grocery and gas purchases.

What Did I Learn From This?

While I wasn’t successful getting a full 2% rebate for my Costco purchases, I was still able to use my Smart Cash card at Costco by purchasing cash cards online and earn 1% cash back instead of 0.73% from using my American Express Air Miles Credit Card.

This was the most unusual way I’ve tried to boost my rewards card earnings.  The small increase in rewards is probably not worth the effort for me in this case, but it does make sense for people who:

• Do the majority of their grocery shopping at Costco and want to earn more rewards
• Have a non-Amex rewards credit card and receive bonus points for increased spending (like the Capital One Aspire World Cash MasterCard, for example)